**Silver as a Store of Value and Medium of Exchange** Several factors can influence silver prices, including geopolitical instability, interest rates, and the strength of currencies. Silver is also used in industries like electronics and solar energy, which affects its demand and price. Silver tends to follow gold price changes closely due to their similar roles as safe-haven assets. The Gold/Silver ratio helps evaluate the value of silver compared to gold. A high ratio may suggest that silver is undervalued or gold is overvalued, while a low ratio can indicate the opposite. Recently, silver’s price dipped to $52.89 an ounce. However, this should be seen as a pause rather than a decline. Since early 2025, the price has jumped an impressive 83%, so a little profit-taking is normal. The overall positive trend remains strong due to significant economic changes this year. **Impact of Federal Reserve Rate Cuts** The Federal Reserve’s rate cuts earlier this year, totaling 75 basis points due to weaker economic data, have greatly weakened the US Dollar. A weaker dollar makes silver cheaper for buyers from other countries, and lower interest rates make non-yielding assets like precious metals more attractive. This has fueled the rally we’ve seen since spring. Industrial demand, particularly from the renewable energy sector, provides a strong price floor for silver. Recent third-quarter reports indicate that demand for silver in photovoltaic (solar) applications is projected to exceed 260 million ounces this year, a new record fueled by global clean energy efforts. This is a significant increase from about 161 million ounces used in the solar industry in 2023, highlighting the importance of this demand. The Gold/Silver ratio has risen to nearly 80, meaning it now takes about 80 ounces of silver to buy one ounce of gold. Historically, this ratio averages around 65-70, indicating that silver may still be undervalued compared to gold despite its recent surge. A widening gap often signals that silver might outperform gold soon, which many traders are closely monitoring. For traders using derivatives, this slight pullback might be a good chance to start new long positions or add to existing ones. Buying call options can allow investors to bet on rising prices while limiting risks, particularly after such a fast price increase. Additionally, placing a pairs trade—going long on silver futures and shorting gold futures—could be a smart strategy to benefit from a potential narrowing of the Gold/Silver ratio in the coming weeks. Create your live VT Markets account and start trading now.

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